GM looks to secure 1st portion of government aidWritten by Associated Press | | firstname.lastname@example.org
General Motors Corp. is days away from securing its first installment of federal aid, money desperately needed to continue operations and pay suppliers as it burns through millions daily and runs the risk of being unable to make a significant supplier payment in early January.
GM said Dec. 29 it is in the process of finalizing a loan agreement for $4 billion, the first portion of $9.4 billion in low-cost loans that GM is expected to receive this month and next from the government.
The cash-strapped Detroit company plans to use the money for continuing its operations, which employ thousands in Ohio.
“We remain confident that a timely signing of the federal loan agreement will occur prior to our needs,” said GM spokeswoman Carolyn Markey.
However the Treasury did not say when the payment would be added to GM’s coffers.
“We’re making good progress finalizing the automaker loans and are committed to closing them on a timeline that will meet their individual near term funding needs,” said Treasury Department spokeswoman Brookly McLaughlin in an e-mail statement Monday.
GM is obligated to a make a large payment to a major supplier in early January, but has declined to offer details on the amount of money it owes or to which supplier.
The loans come from the $700 billion bank rescue plan, approved by Congress in September. President Bush said earlier this month that the ailing automakers could tap part of those funds in the form of low-interest loans.
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
GM previously said it might not make it through the end of the year before running out of cash. But GM board member Kent Kresa said earlier this month that the company might make it into the first quarter, depending on auto sales.
“Certainly it has been stated that we need the money quite soon,” Kresa told The Associated Press. “I can’t specifically state before the end of the year, but certainly in the first quarter and early in the first quarter.”
Ohio’s ties the auto industry are second only to Michigan. Nearly 100,000 people work in 20 Detroit Three assembly plants and parts plants around the state, producing the second most cars and trucks in the U.S. The biggest include a Chrysler LLC complex that makes Jeeps in Toledo and a GM factory in Lordstown that produces the Cobalt and Pontiac G5 fuel-efficient cars.
Auburn Hills, Mich.-based Chrysler is expecting $4 billion in cash as well, but company officials did not offer details on timing of the loan completion Monday.
Chrysler is nearing the minimum level of cash _ $2.5 billion. _ it needs to operate. Chrysler is already fending off angry parts suppliers and other vendors demanding cash payments on delivery. It generally pays suppliers $7 billion every 45 days.
“January, first quarter is a big problem for us,” Ron Kolka, Chrysler’s chief financial officer, said in an interview about the company’s finances earlier this month.
Dearborn, Mich.-based Ford Motor Co. said it does not intend to use government money to fund operations, as it is in a better financial position than its competitors.
The Detroit automakers are trying to weather the biggest auto sales slump in more than 26 years.